What Is The Future Of Crypto Regulation?
Stock market mania has made the headlines in recent days, but remember that a run-up in crypto prices to new highs a few weeks ago posed all of the concerns regarding investor rights and legislation now vexing policymakers coming to terms with GameStop.
Bitcoin and other cryptocurrencies are on the cusp of being mainstream. Digital currencies, which have been around for almost a decade, are transforming the financial landscape. They ushered in a new era of decentralized currencies, with no central authority in charge. Cryptocurrencies, despite their success, have a number of drawbacks. Consumer protection is needed, just as it is in fiat currencies. Digital currency regulation is unavoidable in the long run. Regulations aren’t far away at the moment.
According to a first-of-its-kind systematic analysis of crypto currency trading behavior by Johnson Finance Professor Will Cong and his co-authors, regulation and regulatory policy play a critical role in the health and survival of cryptocurrency markets. In the crypto markets, the study looked at three dimensions of trade sizes and compared regulated and unregulated exchanges. In unregulated markets, they discovered a high rate of “crypto wash trading,” a form of market manipulation.
Buying and selling crypto with the intent of controlling the market is known as crypto wash trading. Traders (mostly bots), brokers, and exchanges create transactions that cancel each other out, or “wash.” The perceived value of exchanges is highly dependent on the total amount of transactions, which is one of the reasons for crypto wash trading. Exchanges inflate their numbers to make themselves more appealing to cryptocurrency ventures looking to list their coin.
What is crypto regulation
Regulations governing cryptocurrency are also beneficial to innovation. While most people believe it stifles creation, the opposite is true. No one knows what to expect because the rules are unclear. Penalties and fines will not be imposed quickly by the regulators. Potential investors must be informed about the dangers of investing in crypto assets such as bitcoin. It also ensures that proper risk evaluations must be carried out prior to onboarding new customers.
Should cryptocurrency be regulated?
Since 2017, when the price of Bitcoin soared to around $10,000 on some crypto exchanges (obviously the community is reaping huge profits, cryptocurrency has impacted every nation. Furthermore, the results seemed to prompt regulatory authorities around the world to draught rules and regulations to govern the decentralised digital financial system.
Many nations, including Egypt, Bolivia, China, Nepal, and others, have outright outlawed cryptocurrencies and deem them to be illegal. China, which was once regarded as the epicentre of cryptocurrencies, outlawed exchanges and initial coin offerings (ICOs), snipped BTC miners’ power lines, and also cut internet links to sites involved in cryptocurrency-related activities.
Consumers and policymakers are still unsure about the crypto world’s regulatory framework at the moment. The question of which institutions are responsible for regulating various forms of cryptocurrencies is still being debated.
Future of crypto regulation
The question of whether or not to govern cryptocurrencies has been debated for a long time. The key goal of decentralized crypto currencies is to escape regulations. Cryptocurrencies, on the other hand, pose a threat to customers. Scams abound, and it facilitates illegal transactions. Regulating these toxic roles is the only way to avoid them. It means that the regulations give them access to a broader market. Finally, they are able to gain customer confidence. Nasdaq and Coin base, two of the most well-known cryptocurrency exchanges, are in favor of the legislation. Because it can affect the cryptocurrency exchange development cost and it can bring more opportunities for the exchanges.
Regulations governing cryptocurrency are also beneficial to innovation. While most people believe it stifles creation, the opposite is true. No one knows what to expect because the rules are unclear. Penalties and fines will not be imposed quickly by the regulators.
Various crypto-related regulations have already been successful. Bitcoin futures, which are regulated, are a success. They offer traders access to cryptocurrency without the associated risks. As a result of the success, Ethereum futures and other derivatives were developed. Regulations that create an enabling environment are critical to the future of cryptos. It’s also to encourage creativity.
What Would Future Crypto Regulations Expect?
Due to a lack of regulations, some products can claim to be cryptocurrency without actually being one. They take advantage of people’s receptivity to new technology. They then deceive the unwary investors. When it comes to shares, certain products even choose to adopt currency status. This is the current state of Initial Coin Offerings (ICOs) (ICOs). Although they began as securities, they have been attempting to maintain their status as currencies. This is to help you get around the rules.
Crypto exchanges must have easy regulations, but not at the expense of defrauding investors. Innovations must be accepted, but they must be accompanied by certain regulatory requirements. So, do you think cryptocurrency should be regulated? The future of cryptocurrency regulation is undeniable, but we should hope for a regulatory crypto space that is more balanced.
The stablecoins, on the other hand, are expected to struggle. The coins are digital assets whose value is linked to fiat money or other commodities. They are common because, unlike other virtual currencies, they are stable. They continue to pose a challenge to conventional economies. Stablecoins will face strict regulations. This is to ensure that the conventional financial system is not jeopardised.
